WASHINGTON— The Federal Reserve may have to wait until 2027 to cut interest rates if a prolonged run of high oil prices tied to the Iran war keeps inflation from moving back toward the central bank’s 2% target, Chicago Fed President Austan Goolsbee said Tuesday, according to Reuters.
Speaking at the Semafor World Economy conference, Goolsbee said he had previously believed multiple rate cuts in 2026 were possible, but warned persistent inflation could push any easing beyond next year.
Goolsbee told Reuters that if inflation does not continue to decline, “that starts pushing it out of ’26,” underscoring that the Fed’s priority remains returning inflation to 2%. The comments come after Fed policymakers in March left the benchmark federal funds rate unchanged at 3.50% to 3.75%, even as a majority still projected at least one cut this year.
Reuters reported economists on Tuesday were projecting the Fed’s preferred core personal consumption expenditures price index likely rose 3.2% in March, which would mark the largest annual gain in the core PCE measure in two years. Before oil prices surged and U.S. gasoline moved above $4 per gallon, Goolsbee had been among the more optimistic Fed officials that tariff-related inflation pressures would ease and allow the central bank to resume rate cuts.
Still, Goolsbee told Reuters there are multiple possible outcomes, including scenarios where rates could rise if inflation worsens or fall if Middle East oil shocks prove temporary and price pressures cool. Reuters noted San Francisco Fed President Mary Daly similarly said last week that, depending on how long oil prices remain elevated, holding rates steady or cutting them appears more likely than a rate hike.